EPA & SCOTUS on GHG: U.S. Supreme Court Makes a Statement on EPA Authority to Regulate Greenhouse Gases as the Public Comment Period for EPA’s Clean Power Plan Gets Underway

The last few weeks have brought significant developments in the U.S. Environmental Protection Agency’s (“EPA”) efforts to regulate greenhouse gas emissions. On June 18, 2014, the EPA published for public comment a proposed rule to implement the Clean Power Plan that it announced on June 2, which seeks to cut carbon dioxide emissions from existing stationary sources, specifically fossil-fuel powered electric generators (the “Plan”). You can read our post on the Plan. On June 23, 2014, the U.S. Supreme Court issued a decision in a separate matter, Utility Air Regulatory Group v. Environmental Protection Agency, et al., 573 U.S. ___ (2014), which took on a question regarding the scope of the EPA’s authority to regulate greenhouse gases from stationary sources under Clean Air Act Title I Prevention of Significant Deterioration (“PSD”) and Title V provisions, which make it unlawful to con­struct or modify a “major emitting facility” or operate a “major source” without a permit. The question before the Court was “whether it was permissible for EPA to deter­mine that its motor-vehicle greenhouse-gas regulations automatically triggered permitting requirements under the Act for stationary sources that emit greenhouse gases.” The Court’s answer to the question was yes and no, which those on both sides of the fight have found reason to celebrate. The case has been described on the one hand as “a stark reminder that the EPA’s power is not unlimited,” but on the other hand as a “a resounding win for EPA” that “allows the agency to continue requiring carbon pollution limits for the nation’s largest sources.”

Background

The Supreme Court explained that after its decision in Massachusetts v. EPA, 549 U. S. 497 (2007), which allowed EPA regulation of greenhouse gas emissions from new motor vehicles under Title II of the Clean Air Act, the EPA “embarked on a course of regulation resulting in ‘the single largest expansion in the scope of the [Act] in its history.’” This expansion included efforts to regulate greenhouse gas emissions from stationary sources, and in the “EPA’s view, once greenhouse gases became regulated under any part of the Act, the PSD and Title V permitting requirements would apply to all stationary sources with the potential to emit greenhouse gases in excess of the statutory thresholds.” The EPA sought to tailor the permitting threshold emissions levels to account for the fact that greenhouse gas emissions “tend to be ‘orders of magnitude greater’ than emissions of con­ventional pollutants,” and “requiring permits for all sources with greenhouse-gas emissions above the statutory thresholds would radically expand those programs, making them both unadministrable and ‘unrecognizable to the Congress that designed’ them.”

The Utility Air Regulatory Group Decision

The Supreme Court broke down the issue before it into two inquiries: (1) whether the EPA permissibly determined that a stationary source may be subject to the PSD and Title V permitting requirements on the sole basis of the source’s potential to emit greenhouse gases; and (2) whether the EPA permissibly determined that a stationary source already subject to the PSD program because of its emission of conventional pollutants (an “anyway” source) may be required to limit its greenhouse-gas emissions by employing the “best available control technology” (“BACT”) for greenhouse gases.

The Court held that the EPA did exceed its authority when applying the PSD and Title V permitting requirements to stationary sources solely by reason of greenhouse-gas emissions. The Court further ruled that the EPA lacked the authority to tailor the threshold requirements for emission levels that were set forth in the statute in an effort “to accommodate its greenhouse-gas-inclusive interpretation of the permitting triggers.” The Court declared that “[i]nstead, the need to rewrite clear provisions of the statute should have alerted EPA that it had taken a wrong interpretive turn. Agencies are not free to ‘adopt . . . unreasonable interpre­tations of statutory provisions and then edit other statutory provisions to mitigate the unreasonableness.’” The Court held “[s]pecifically, the Agency may not treat greenhouse gases as a pollutant for purposes of defining a “major emitting facility” (or a “modifi­cation” thereof) in the PSD context or a “major source” in the Title V context. To the extent its regulations purport to do so, they are invalid.”

However, the Court held that the EPA may require a stationary source that is subject to the permitting requirements anyway to limit its greenhouse gas emissions by implementing the BACT for greenhouse gases. The Court found that the EPA could “continue to treat greenhouse gases as a ‘pollutant subject to regula­tion under this chapter’ for purposes of requiring BACT for ‘anyway’ sources” because “the record before [it did] not establish that the BACT provision as written is incapable of being sensibly applied to greenhouse gases.” The Court did declare that the EPA can only require compliance with greenhouse gas BACT if the anyway source “emits more than a de minimis amount of greenhouse gases,” which the EPA must establish and defend.

While the Court’s decision limited the EPA’s authority to require PSD and Title V permitting solely on the basis of greenhouse gas emissions, the impact of that portion of the decision will not be far reaching. Justice Scalia reportedly stated from the bench while delivering the opinion that “EPA is getting almost everything it wanted in this case….It sought to regulate sources it said were responsible for 86% of all the greenhouse gases emitted from stationary sources nationwide. Under our holdings, EPA will be able to regulate sources responsible for 83% of those emissions.” The EPA has touted that its “inaugural suite of carbon pollution rules have now been fully vetted in federal court, and have emerged victorious, and largely unscathed.” The agency’s “proposed Carbon Pollution Standards and recently proposed Clean Power Plan are the next important steps in the Agency’s effort to address climate change.”

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About Brian Heslin

Brian Heslin represents energy companies in regulatory proceedings at the state and federal level. In addition, he provides advice on busines and strategic planning, upstream natural gas supply and capacity negotiation, compliance and other related services.

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